HOUSEBUILDERS and small businesses are set to suffer the effects of the ongoing Brexit negotiation crisis, after a series of cabinet resignations sparked calls for another election.
Financial experts have warned that there are “big risks lying ahead” for the property market, while the sinking value of the pound is expected to have a negative impact on small- and medium-sized enterprises (SMEs).
Last night, Prime Minister Theresa May met with ministers to win their approval for the latest version of the EU Withdrawal Bill, but several cabinet minsters resigned in protest.
Brexit Secretary Dominic Raab and Work and Pensions Secretary Esther McVey were among the first to quit their positions after expressing dissatisfaction with the bill.
In response, the FTSE All-Share dropped in value, while the pound fell by more than one per cent against the US dollar and the Euro.
“The market has taken a big red pen to stocks which are heavily exposed to the UK economy like the banks, retailers and housebuilders,” said Laith Khalaf, senior analyst at Hargreaves Lansdown.
“These sectors were already under pressure, but the potential for an orderly Brexit to unravel in the next few days is causing further distress to be manifested in share prices.
“The pound has fallen, which is acting as a buoyancy aid for the Footsie index, as it boosts the share prices of the big international firms whose revenue streams largely come from overseas.
“However if sustained, a weaker pound spells bad news for a retail sector which is already struggling, as it hikes up the price of imported goods and at the same time squeezes consumer incomes.”
James Newbery, investment manager at property investment platform British Pearl, said that the UK property market was particularly vulnerable, stating that “Brits clearly see some big risks lying ahead for the property market.”
He added that although prices are continuing to rise in many areas, the housing market can feel precarious for many Britons, depending on who is in charge of the purse strings.
“As such, the need for a more cautious and thoughtful approach is more important than ever, particularly for landlords and investors who must navigate a politically uncertain minefield,” added Newbery. “As tax changes and legislation make buy to let even harder for landlords, more and more are turning to unitised ownership to diversify their portfolios.”
Meanwhile, the Federation of Small Businesses (FSB) issued a statement warning that “a chaotic no deal Brexit that would be deeply damaging and dangerous for our small firms.”
FSB national chairman Mike Cherry urged parliament to pass the deal so that small businesses have the security of a transition period which will allow them to continue operating as normal from 29 March 2019 until at least the end of 2020.
“This brings with it some certainty that our small businesses have craved,” added Cherry. “It will hopefully lead to businesses pushing the go button on investment decisions that have been on pause as they waited for a better understanding of the medium-term trading landscape post Brexit day.
“Whatever option is agreed upon, it is essential that our small firms are given sufficient time and support to prepare for any changes.”
Stuart Law, chief executive of Assetz Capital said that it is likely that the peer-to-peer lending sector will remain critical to supporting UK businesses during Brexit uncertainty.
“Once the full effects of the Brexit deal wash through and we return to normal times again, our contribution will be seen more clearly,” Law added.
“Earlier this year, we found that just 10 per cent of our investors were confident in the government securing a good Brexit deal, and with the cabinet in disarray, there’s little chance of this sentiment improving in the coming months.”
Further chaos could be on the horizon, as betting firms have slashed the odds on Theresa May leaving her post by the end of the year. Meanwhile, the odds of a second referendum being held by 2020 have narrowed from 7/2 to 15/8.